Behind the Lines

Saturday, March 29, 2008

Last November, I argued on these pages that New Labour had missed its best opportunity to reform the unfair funding rules that have penalised this and other English regions for the past 30 years.

The Barnett Formula, which awards Scotland an extra £1,500 a year in public spending per person, has long been a source of irritation south of the border, not least in the North-East.

The last time I looked at the issue, I said Gordon Brown’s best chance to address it had come in 1999 when the Labour-controlled Treasury Committee of MPs produced a report calling for the formula to be reassessed.

But it seems I was wrong. Quite unexpectedly, another window of opportunity has opened up over the last few months, and for the first time, the prospect of real change is finally in the air.

Of course, it is all officially denied. The Government has long held to the line “We have no current plans to reform the Barnett Formula” whenever asked about the issue, and that has not changed.

But of the fact that something is up, there can be no longer be any reasonable doubt.

Earlier this week, the three unionist parties in the Scottish Parliament – Labour, the Tories and the Lib Dems – agreed to set up a Commission to look at the Parliament’s powers and funding.

In a Commons statement the following day, Justice Secretary Jack Straw said the Commission would consider whether the Scottish executive should take more responsibility for the money it spends by devolving more taxes from the UK Treasury.

Although the government is keen not to pre-empt the Commission’s findings, no serious investigation into the Scottish funding system could fail to open up the whole issue of how the formula operates and whether it should continue.

In addition, the Treasury itself is due to publish what it calls a “factual paper” on the workings of the formula later this year which it says will be used to “inform public debate.”

The straws in the wind were sufficient to persuade BBC Political Editor Nick Robinson to comment on his blog that “the skids appear finally to be under the Barnett Formula.”

“Labour's Scottish leader has argued that the Scotland government needs to take more responsibility for what it spends - in other words, having to raise taxes when it wants to raise spending. This will inevitably raise questions about our old friend Barnett.”

There is also the evidence of a leaked Downing Street memo of a ministerial meeting on 28 January this year, which first saw the light of day in a Sunday newspaper a few weeks’ back.

It revealed that Mr Straw – who has replaced John Prescott as the formula’s leading Cabinet opponent - had urged the Prime Minister to look at it afresh in order to address growing concern within England.

He won the surprise backing of the Defence and Scottish Secretary, Des Browne, who said the Government had to be “proactive” on any review of the Scottish Parliament’s financial powers.

According to the memo, the Prime Minister then agreed that the funding issue “could not be ignored” but noted there had to be a “considerable period” of public debate on the matter.

So what brought about the apparent shift? Well, more than anything else, it is down to developments in Scottish politics.

Although the SNP-led Scottish Government in Edinburgh publicly protests about the potential loss of the Barnett billions, it is quite relaxed about the overall direction of policy on devolution.

First Minister Alex Salmond wants more tax-raising powers for the Scottish Parliament and the demise of Barnett could be seen as a small price to pay in pursuit of the greater goal of Scottish self-determination.

To put it another way, continued financial dependence on England is clearly incompatible with the greater financial devolution which the SNP, and increasingly Labour and the Lib Dems too, are seeking.

In terms of wider UK politics, ministers also appear to be increasingly concerned about the so-called “English Backlash,” even though the existence of this is nothing new.

Tory leader David Cameron has not thus far committed his party to abolishing the Barnett Formula any more than he actually committed to dualling the A1 in his Journal interview the week before last.

Nevertheless, ministers fear that the formula could be the subject of a vote-catching pre-election announcement by Shadow Chancellor George Osborne similar to his coup-de-theatre on Inheritance Tax last October.

Hence by laying the ground for the early phasing out of the formula, they are, to use the well-worn phrase, shooting the Tories’ fox.

The Journal has undoubtedly played its part in increasing awareness south of the border of the formula’s inherent absurdities.

Over the past ten years, it has been the only regional newspaper that has consistently taken the trouble to explain how this complex formula actually affects people’s services.

Earlier this year, it revealed that £1.6bn in transport funding would automatically be going to Scotland as a result of the £16bn Crossrail scheme – whether or not they actually have anything to spend it on.

For less than a fifth of that £1.6bn sum, the North-East could dual the entire length of the A1 between Newcastle and the border and reopen the Leamside line between Newcastle and Teesside.

Of course, whether the North-East will actually gain from the demise of the formula is still very much an open question.

If it is replaced by a “Barnett Mark 2” which recognises the needs of other regions besides Scotland and Wales, it will almost certainly do so, but if the system is scrapped altogether, it is unlikely the region will see much change.

In this context, it is worth remembering that the North East lost out twice over from Crossrail – once to the tune of £1.6bn to the Scots, but also to the tune of £16bn to London.

Barnett or no Barnett, the long battle for a fair funding deal for the North-East still has a way to go yet.

Friday, March 28, 2008

Oscar Wilde once famously said that a cynic is someone who knows the price of everything and the value of nothing. If he was right about that, then it is clear that we live in a very cynical age.

It was Dr Richard Beeching who started it. In 1963, he axed thousands of miles of “unprofitable” railways thus depriving hundreds of rural communities of their lifeline to the outside world.

In time, the extension of car ownership helped to mitigate the effects of the “Beeching Axe,” but 45 years on, this has brought its own problems in terms of the impact on the environment.

The cost of keeping those rural railway lines open was very clearly appreciated at the time. The value of doing so, both to present and future generations, was perhaps less so.

Two decades on, the destruction of the coal industry by the Thatcher government fell into a similar category.

Scores of pits were forced to close on the grounds that they were “uneconomic,” with little analysis of the value of maintaining an indigenous coal industry, or of the value of the communities which depended on the mining jobs.

Those communities never really found another role and today many of them are riddled by drugs, crime and long-term unemployment.

Once again, the economic cost of keeping the pits open was clearly appreciated by everyone – but what, if any, value was put on the lives and communities which were destroyed?

By the time the Iron Lady left office in 1990, the elimination of any consideration of non-monetary value from political decision-making in this country was all but complete.

From then on, when confronted with a new policy idea, people would tend to ask “what is it going to cost?” as opposed to “what value will it bring?”

Mrs Thatcher’s defenders would argue that it was precisely the imposition of such financial rigour that brought about the transformation of the country from an economic basket-case to an economic success story.

Her detractors, though, would say it exacerbated the divide between a country of haves and have nots and turned us into a nation of cynics, in the Wildean sense of the term.

So where is all this going, in terms of current-day political debates? Well, over the past ten days, we’ve seen a couple of examples of what can happen in a political culture which knows the price of everything and the value of nothing

In the Budget, Chancellor Alistair Darling slapped a 2p increase on the price of a pint of beer and 14p on a bottle of wine, ostensibly to tackle “binge drinking.”

As I noted last week, any sensible approach to this problem would have concentrated on more targeted measures such as curbing “happy hours,” and clamping down on supermarkets who sell booze at cheaper prices than bottled water.

In fact it was no more than a transparent tax grab on a “soft” target - drinkers – who are second only to smokers when it comes to providing the Treasury with a convenient cash-cow.

The main casualty of this of course is not the “binge drinking culture,” but the village pub, already under threat from the exodus of young people in favour of second-home owners.

As a result, the Budget has already spawned an internet campaign on the social networking site Facebook calling for Alistair Darling to be barred from every pub in Britain.

Okay, so this is the usual kind of frivolous nonsense you would expect from Facebook, but there is a serious political point here.

No-one is arguing that local pubs should be subsidised by the state in the way that the railways and the coal industry were, but the state should at least seek to create a tax environment which recognises their importance.

And just as pubs are at the heart of their communities, so too are post offices - 2,500 of which are due to close in the next year.

Leaving aside the fifth anniversary of the Iraq invasion – and I really have said all I want to say about that – the rebellion by 19 Labour MPs against the planned closures provided the major talking point of the week at Westminster.

What was notable about this rebellion was that it occurred in a debate initiated by the Tories – something which is almost unheard of for Labour MPs to do.

Yet 19 of them felt sufficiently strongly about the issue to overcome tribal hostility, including Easington’s John Cummings, who has never forgotten that his first duty is to his local community.

Does this debate actually mean anything in terms of party politics? Well, there was possibly more than an element of gesture politics about this week’s Commons vote.

For all their sound and fury, the Conservatives have not actually committed themselves to re-opening the threatened sub-post offices, and no-one seriously expects them to.

Indeed, given that Shadow Chancellor George Osborne this week pledged to stick to Labour spending plans for the first four years of a Tory administration, it is hard to see how they could find the money.

But the absence of a genuine debate on this and other issues does again pose the question of what politics, and government, is really for.

In the final analysis, we don’t need sub-post offices, or railways, or even local pubs. We can do all our banking online, all our drinking at home, and all our travelling in the car.

We can have a perfectly functional society that way, but it will be an increasingly atomised one.

The question is whether that is something we really want, or whether we should be doing more to protect those bits of our national life which cannot be measured in purely monetary terms.

It’s a question which no politician since Thatcher has seriously attempted to answer.

Friday, March 14, 2008

Having sat through every one of New Labour’s Budgets – latterly via the telly rather than live in the Commons Chamber - I have no hesitation in declaring this year’s the most boring of the lot.

We were told not to expect any surprises, and Wednesday’s 50-minute speech by Chancellor Alistair Darling certainly lived down to its billing.

But the fact that it was, by some distance, the most politically unexciting Budget for more than a decade does not necessarily make it a bad Budget.

Indeed, if Mr Darling is proved right in his central contention that Britain is well-placed to weather the global economic slowdown, it could even turn out to be an election-winning one.

From the opening minute, in which the word “stability” was mentioned no fewer than four times, the Chancellor’s message was clear: the British economy is safe in my hands.

And just as Mr Darling’s personal unflashiness is designed to present a reassuring front, so there was something rather comfortingly reassuring about the content of his speech.

It was a bit of a nostalgic throwback to the Budgets I was used to when I was growing up in the 60s and 70s – booze, fags and petrol up, and little else to write home about.

The lack of excitement was purely deliberate. As one commentator put it: “I suspect that the government will be quite pleased if this Budget is nothing more than a one-day story.”

Before looking in any further detail at Mr Darling’s package, let me make my now customary declaration of interest.

I will in fact be better off as a result of the forthcoming tax changes by around £331 a year, but most of that is down to the 2p reduction in income tax announced by Gordon Brown last year.

But as the driver of a Vauxhall Zafira who likes the odd drop of Scotch, the announcements made on Wednesday alone will actually leave me marginally worse off.

The increases in alcohol duties will set me back by approximately £28 a year, while the extra vehicle excise duty on my gas-guzzling but child-friendly people carrier will cost an additional fiver.

As a middle-income earner who nevertheless supports the principle of redistributive taxation, I would normally be quite content with this

Certainly, if I thought my £33 was going towards helping to take 250,000 children out of poverty, as was Mr Darling’s stated aspiration, I would be more than content – but that’s a big if.

The best that can be said is that the government’s heart is in the right place. “Where money can be spent, it goes on child poverty. This is simple, authentically Labour, and right,” said one left-leaning pundit.

But whatever the government’s good intentions in this area, its record is, to say the least, mixed – as for instance was shown by the widening health inequality figures published this week.

Similarly, if I thought my extra alcohol taxes were helping to curb the binge drinking culture that has blighted so many of our town and city centres, I would be satisfied.

But while I have no doubt that the price of alcohol does have some impact on consumption, this is an even bigger “if.”

The use of alcohol duties to curb binge drinking is really a very blunt instrument for tackling a complex problem which requires much subtler, more targeted measures.

If anything, the government should be clamping down on supermarkets who sell cheap booze, not putting more pubs out of business by raising prices across the board.

Neither did the Budget quite manage to live up to its advance hype as “greenest ever.”

On the plus side, the new higher rates of vehicle excise duty for gas guzzlers and the threat to force supermarkets to charge for plastic shopping bags will no doubt bewelcomed by environmental campaigners.

But against that, fear of fuelling inflation forced Mr Darling to compromise his green credentials somewhat by postponing the planned 2p increase on petrol.

And just as no government that is introducing ID cards can seriously claim to champion the cause of liberty, so no government so dedicated to airport expansion can seriously claim to be “green.”

What, though, of the macroeconomics? This is, in the end, the measure by which the 2008 Budget will be judged.

The argument is not really about what could be done in this year’s Budget to deal with the global “turbulence.” The truth is that Mr Darling had very little room for manoeuvre.

No, the real argument is about what the government – and specifically Gordon Brown as Chancellor – has done over the preceding decade, and what state it has left the economy in.

Specifically, it is about whether, as Mr Darling claims, Britain is now best-placed to weather the global crisis, or whether as Tory leader David Cameron argues, it is in fact worst-placed.

We won’t know who is right about this for at least 18 months to two years – but on the answer to this question will almost certainly hang the result of the next general election.

If Mr Darling turns out to be wrong, it will leave Labour’s reputation for economic competence shredded beyond recall, and Mr Cameron heading for a landslide.

But if it turns out that Mr Brown’s long stewardship of the Treasury did indeed leave Britain best-placed to weather the storm, then Labour will in all probability win an unprecedented fourth term in government.

In those circumstances, New Labour’s most boring Budget could also turn out to be one of its best.

Saturday, March 08, 2008

THERE was a time when Britain’s relationship with Europe seemed to be a defining issue in domestic politics, one of the crucial dividing lines that differentiated the two main parties from eachother.

In the early 1970s, the Tories led by Edward Heath were in the main a pro-European party, taking Britain into the then Common Market in 1973 against considerable odds.

Labour, in those days, was the more Eurosceptic party, voting against EEC entry in 1973 and, ten years later, actually fighting its "suicide note" election on a policy of withdrawal from the community.

Then, during the Thatcher-Major years, the two parties gradually swapped positions, with the Tories becoming increasingly hostile to Brussels while New Labour appeared enthusiastically to embrace it.

Such an analysis, however, runs only skin deep. The truth is that the two parties were never really united in their approach to the European issue, and that holds as true today as it ever did.

It is a matter of historical fact, after all, that Mr Heath only managed to overcome his own anti-European rebels in '73 with the help of Labour's pro-European rebels led by Roy Jenkins.

That pro-European Labour faction eventually split off from the party to form the SDP, initially under Mr Jenkins' leadership, which in turn gave rise to the Liberal Democrats.

But, as this week's events have shown, there are even a few Eurosceptics in that party too, though they tend to be concentrated down in its South-Westerly fringes.

Europe, then, is less the crucial dividing line in British politics, more the issue on which every major political party itself is internally divided.

Or as they used to say about the economic disparities between the English regions, the differences within the parties over Europe are at least as great as the differences between them.

Only Europe could see Dennis Skinner making common cause with Bill Cash – or to use a more local example, Ronnie Campbell in the same voting lobby as Peter Atkinson.

And only Europe could see Ken Clarke defying his party to stand shoulder to shoulder with Gordon Brown – a man he despises for having taken the credit for his work as Chancellor in the 1990s.

The point at issue this week was whether we should hold a referendum on the infamous EU Reform Treaty – regarded by its opponents as the European Constitution by another name.

Some have tried to dress it up as an argument about “democracy” and whether people, rather than politicians, should ultimately take these sorts of decisions - but don’t be fooled.

With very few exceptions, the people who wanted a referendum were those who think the EU already has too much power and don’t want to see its tentacles extending further into our national life.

By contrast, the people who didn’t want one were by and large those who are comfortable with the European project and happy for the EU to have its own president and foreign minister.

Does any of it actually matter any more? Wasn’t the issue of Britain’s membership of the EU settled irrevocably with the original referendum back in 1975?

And with joining the Euro now ruled out for the foreseeable future, haven’t other issues such as health, education, tax, crime and climate change risen to the top of the political agenda instead?

Well, yes. But there are, to my mind, two sets of circumstances which could see Britain’s relationship with Europe plunged firmly back in the spotlight.

While the first of these is merely a personality issue, the other concerns one of the most difficult challenges facing Britain as a nation and goes to the heart of our self-identity.

The first of these scenarios is one in which Tony Blair becomes the EU’s first executive president, a post being specifically created by the Reform Treaty approved by the Commons this week.

Unless the Irish block the Treaty in their own referendum, it will now almost certainly come into being – but will the former Prime Minister and Sedgefield MP get the job?

French leader Nicolas Sarkozy is enthusiastically in favour, German Chancellor Angela Merkel appears to be against – and Gordon Brown isn’t saying.

I suspect, however, that his private view of the prospect of his old rival making a dramatic return to the European political stage roughly approximates to “over my dead body.”

It is easy to see why. If Mr Blair is appointed, every subsequent clash between Britain and Brussels will be seen through the prism of the convoluted Blair-Brown relationship.

The Europe “story” will be back on the front pages – but this time reborn as pure political soap opera rather than dry-as-dust debates about qualified majority voting.

But even if Mr Blair is passed over, there is a second, more troubling scenario under which the European issue could flare up again, although it is not a particularly comfortable one for those of us of a generally pro-European liberal bent.

It is the question of how we reconcile our finite national resources with the continued influx of Eastern European immigrants who now have complete freedom of movement within the EU.

Last month, the government announced a strict new points system for those coming into the country from outside the EU including the need to sit an English test.

But as the Tories have pointed out, it will have virtually zero net effect on immigration because economic migration from within the EU is set to carry on increasing.

Ultimately, there are only two ways to resolve this conundrum – to get the EU to change its own rules, or, if it will not do so, to withdraw from the EU.

Somehow, I sense that the debate over Europe which has ebbed and flowed through British politics for the past 40 years is not quite done with yet.

Friday, February 29, 2008

A common phenomenon in US presidential elections is the emergence of candidates who are running not so much against an individual opponent, but against the whole political system.

Jimmy Carter, the peanut farmer who went from obscurity to the White House in 1976 on the back of the Watergate scandal, is perhaps the best example of an outsider who successfully ran “against Washington.”

In the current contest, both Barack Obama and to a lesser extent John McCain are attempting the same trick, positioning themselves against rather tired and discredited party establishments.

It’s the kind of thing that’s never really caught on over here. But as the reputation of Parliament continues to plummet in public esteem, it may not be very long before it does.

Over the past week, the ongoing repercussions of the Derek Conway affair have continued to cast a shadow over Westminster, with the Speaker Michael Martin being dragged into the controversy over MPs expenses.

It emerged that he had claimed £17,000 a year for a home in Scotland on which the mortgage had already been paid off, while his wife claimed more than £4,000 in taxi expenses since May 2004.

The eventual fate of Mr Martin – and the jockeying for position going on among the potential candidates to succeed him – will doubtless be another column for another day.

For now, the main interest for me lies in how the main opposition parties have been seeking to exploit the growing public unease about MPs’ conduct, and how this might influence the next election.

Some commentators were surprised that Tory leader David Cameron took internal House of Commons issues as his theme for Prime Minister’s Questions on Wednesday.

He kicked off by asking MPs’ pay, followed-up on the government’s refusal to grant referendum on the EU reform treaty, and finally called on Gordon Brown to agree to a televised debate at election time.

For once, Mr Brown was thought to have got the better of the exchange, but the more perceptive observers of the Westminster scene recognised the logic behind what Mr Cameron was up to.

It is this. Like Mr Obama across the pond, he is positioning himself to run at the next election not just against Mr Brown, but against the whole sleazy old establishment.

Said one commentator: “Cameron was trying to suggest he is on the side of those with their noses pressed up against the Westminster window who dislike what they see going on inside.

“Did it work for the Tories? A Westminster insider would answer no. I suspect, however, that if it was shown to a focus group of civilians they would understand it much more easily.”

This is potentially a rich seam for Mr Cameron up against a rather shop-soiled government that, by the time of the next election, will have been in power for half a generation.

If a public head of steam starts to get up in favour of major reform of our parliamentary institutions, the Tory leader is well-placed to ensure that he is in the vanguard.

But so, too, of course, is Nick Clegg, whose party has always led the way in championing political reform and who is also clearly seeking to “run against Westminster.”

This week, the Lib Dem leader launched an outspoken attack on what he called “clapped out 19th century practices” after Mr Martin refused to select his amendment in the debate over the EU reform treaty.

Mr Martin, as is his wont, seemed to take it rather personally, warning Mr Clegg to “be careful where you go with that,” but I don’t think he was attacking the Speaker so much as the system.

Later, his foreign affairs spokesman, Ed Davey, underlined the point by appearing to deliberately get himself thrown out of the Chamber for angrily querying Mr Martin’s ruling.

So what will the public make of it all? Well, one question that immediately springs to mind about the two opposition party leaders is whether either of them are actually convincing “outsiders.”

Both are in fact consummate insiders, both fully paid-up members of what the author and commentator Peter Oborne calls the “political class.”

Mr Cameron’s role as an adviser to Chancellor Norman Lamont during Black Wednesday is well-known. His only job outside politics was as a PR man at Carlton Television.

Mr Clegg has even less experience of life outside the “bubble.” After completing his MA, he worked for the then European Commissioner Sir Leon Brittan, before becoming an MEP in 1999 and finally an MP in 2005.

A more particular challenge for Mr Cameron is whether he can overcome the memories of the Tory sleaze of the 1990s - not least with reminders such as Mr Conway still hanging around like a bad smell.

He certainly intends to try. A flavour of the Tories’ new approach came in a letter this week from the 2005 intake of Tory MPs, almost certainly written with the leadership’s encouragement.

It calls for consideration to be given to a US-style “recall mechanism” which would enable constituents to vote on whether a misbehaving MP could be removed during the course of a Parliament.

It’s the kind of thing that not only demonstrates radical thinking, but ensures that the Tories are seen as being on the side of the people – vital for any opposition party serious about winning power.

The real sadness about all this for Labour supporters is that Mr Brown could conceivably have claimed the reform mantle for himself had he been bolder last summer.

Long before the “dodgy donations” affair, he planned to restore trust in politics by handing key powers back to Parliament – but the proposals turned out to be a damp squib.

Now, just as there was in the United States after Watergate, there appears to be a growing desire among the public for a more far-reaching spring-clean of our political system.

Mr Brown may well sympathise with that desire, but it seems certain that his two opponents will be the ones who reap the benefit.